The Supermarket Must Die. App-Fueled Services Can Kill It

There is no greater temple to our industrialized food system than the American supermarket. With its bins of megafarmed produce, attention-seeking boxes of processed foods, and generous, if anonymous, cuts of meat, it is a place of comforting predictability and one-stop convenience. And like the American waistline, it’s also huge: A typical supermarket is 46,000 square feet and carries some 42,000 products. Problem is, it’s a terrible way to get food.

Such scale demands a vast supply chain, with goods transported to multiple distribution centers before they arrive at stores. This comes with costs, most notably in food loss. A 2014 report found that 43 billion pounds of retail food didn’t make it to consumers, for reasons like mold, inadequate climate control, and other factors the industry calls shrinkage (let’s face it, that’s embarrassing for anyone). All this is damaging to the environment and, because it encourages mass production, gives us worse food (in terms of both taste and nutrition). The supermarket was once a modern marvel, but, as they say, that register is closed: The $638 billion industry is ripe for reinvention.

Thanks to the smartphone-addicted consumer, GPS, apps, and the Internet, a new breed of startup is building systems that make it easier for producers to know just how much to produce, for shoppers to order just what they want, and for food to get from one to the other faster and with fewer stops in between. They range from offerings like Instacart, which gets us partway there by providing a digital portal into existing stores, to more advanced services, like Farmigo, that show the potential to eliminate physical stores entirely. All emphasize convenience. Many promote transparency, responsible practices, and shorter supply chains. The upsides: ­higher-quality food, easier-than-pie delivery, a wider range of growers, and reduced waste and carbon emissions. The downsides: For now it tends to be expensive, and the market will need to grow before these services can break out of elite cities. But the future they promise—the end of the strip mall monolith and better and smarter food, to boot—is hard to resist.

Instacart: The Personal Shopper

WHERE: 18 US metro areas, including Chicago, Miami, New York, and San Francisco

WHAT: Almost the entire inventory of stores like Whole Foods and Petco (in some areas you can get Insta-booze!)

PRICE: At or above in-store cost, plus a delivery fee

This concierge-style service relies on the existence of brick-and-mortar stores but does the shopping for you—often delivering in an hour or two. At some Whole Foods locations, Instacart even has its own checkout lines and staging areas. When it comes to traditional grocers, “it’s truly a joint partnership,” says Vishwa Chandra, Instacart’s vice president of retail accounts. The company taps into inventory data and lets stores set prices; Instacart gets either a fee or a percentage of the sale. According to the company, its customers buy two and a half to four times as much as in-store customers—and not just in the fancy (or not-so-fancy) chain stores. Instacart partners with co-ops too. “It’s important to have that breadth,” Chandra says. “We didn’t want this to be just the large guys getting online.”

1. Place the Order

Forget traffic jams in the produce aisle: Customers punch in their zip code online or via the app to see partnered retailers in their area, from big guys like Whole Foods and Costco to local shops like Bi-Rite in San Francisco. They also see whether prices are currently at or above regular store prices. If an item is out of stock, users can choose an alternative or tag a quality, like “sweet cereal,” that any replacement should satisfy. (The most-ordered item? Bananas.)

2. Fill the Order

Instacart shoppers—part-time employees who work with no minimum-hour requirement (Boston alone has more than 400 shoppers)—have dedicated apps that notify them of new orders. Each order is sent to a specific shopper, and the app’s algorithm tries to provide the most efficient way to navigate the store to fill it.

The shopper scans the barcode of each item. If it matches the customer’s request, it’s marked as found.

If, say, the shopper scans 2 percent milk when the customer ordered skim, the app flags the error. (Customers and shoppers can also communicate through the app—for example, the shopper can alert the customer that the store is out of pears, and the client can request to get apples instead.)

Once the list is completed, the shopper checks out. If they’re in a store with a dedicated Instacart station, the cashier will confirm that the items match the order. Orders are packed into bags, which are then labeled, numbered, and held for delivery. (Temperature-sensitive bags sit in Instacart refrigerators and freezers until they’re ready to go.) Instacart pays for the groceries then gets reimbursed by the customer.

3. Deliver the Goods

Sometimes shoppers also deliver, but usually independently contracted drivers (think Uber) take over, loading orders into vehicles—or, in dense urban markets like New York City, pushcarts—and bringing them to customers’ doors along a route determined by the app for maximum efficiency.

If an order contains goods from more than one store, the app also takes that into account, matching drivers accordingly. Tipping is optional—most Instacart customers do.

Farmigo: The Virtual Farmers’ Market

In 2009, when Farmigo started gathering local producers into a community marketplace, founder Benzi Ronen noticed that half the farmers it approached had broadband. He realized that with online software he could create a network of farms and a transparent supply chain: “You can almost track a tomato like a FedEx package,” he says. And so Farmigo does, following the 500 items sold in each region as they flow from the farmers (who earn a hefty 60 cents on the dollar) to the warehouse employees, contracted drivers, and pickup-hub organizers. With small staging warehouses and nimble pickup venues, Farmigo can apply the same decentralized model to dense urban communities and sparser suburban ones in places like New Jersey and Tacoma, Washington. Here’s how.

1. Create the Market

Farmigo is strict about locality and sustainability: Each region has a sourcing manager who interacts with farmers (and producers like bakers and cheesemakers), all of whom meet the company’s family-ownership and non-GMO criteria and whose goods are certified organic by the USDA or grown sustainably. Ronen’s aim is to have 90 percent of items produced within 150 miles of the market community—though Farmigo does sell items like avocados and lemons that it flags as nonlocal. Off-limits? Bananas. Non-US products are “not a line we’re willing to cross,” he says.

2. List What’s Available

Three or four days before the order window opens, farmers input predictions for that cycle’s harvest—18 bushels of eggplant, 500 heads of broccoli—into Farmigo’s software. This virtual inventory is updated constantly during each order cycle to account for changes in the field.

3. Place the Order

Customers log on, online or via app, choose pickup locations, and shop from traditional grocery categories (plus themed offerings like Bestsellers Bundle, featuring the week’s most popular picks). The order window opens five to six days before pickup (Mondays and Wednesdays), and customers can edit orders until the window closes.

4. Fill the Order

When that window closes, the system automatically emails orders to the farmers and producers, who harvest or prepare accordingly (often also creating short backstory videos for customers). Independently contracted drivers deliver the goods from vendors to the local warehouse.

5. Pack the Goods

Rather than one centralized warehouse, Farmigo operates many small ware­houses—really just staging areas where orders are packed—to keep them closer to both farmers and cus­tomers. The crew monitors progress with tablet-based software: First, team members do quality inspections and update the system if, say, the farmer ran out of the spaghetti squash you ordered and is substituting butternut. (Auto-generated emails alert customers to switches.) Foods are wrapped in compostable protective materials, and refrigerated items are insulated in inflated cool sleeves with biodegradable ice packs. Everything is placed in insulated containers for easier stacking, and each step is tracked. “The minute goods transition from one point to another, you need to store the information,” Ronen says. “So if there’s a break in the process, you know who’s accountable.”

6. Deliver the Goods

Drivers stock vans (which are easier to come by than trucks and are better for navigating through multiple stops in dense urban areas) with the orders for five to six pickup locations, then make the rounds to the schools, houses of worship, and gyms that serve as pickup nodes. Those spots are chosen by either the organizers or Farmigo itself, which reaches out to community hubs to see if they’d be willing to host.

7. Pick Up

When a customer arrives, they scan the labeled Farmigo bags for their name, then head home feeling satisfied that they didn’t have to deal with a trip to Whole Foods.

FreshDirect: The Grocery Warehouse

WHERE: Metro New York and New Jersey; parts of Connecticut, Delaware, and Pennsylvania

Launched in 2002, FreshDirect is an online twist on the classic one-stop shop. It offers a huge variety of national and local products, focusing on direct sourcing and in-house production. The whole show is run out of a facility in Queens, New York, where 200 pros prepare over 2,000 products—the bakery alone produces 14,000 loaves of bread and 5,000 croissants every day. With long-standing relationships with farmers and suppliers, FreshDirect can also sell products before they hit the (virtual) store, doing advance recon like communicating with fishermen about the day’s catch while they’re still on the boat. Altogether, the company says, its system helps turn over inventory twice as fast as typical brick-and-mortars do—while filling orders that are on average three times larger.

1. Place the Order

Online or via app, FreshDirect customers shop a virtual store personalized with their data: They can order from favorites, repeat past orders, and browse frequently purchased products. In addition to shopping traditional “aisles,” consumers can sort according to factors like organic, gluten-free, or local.(The produce and seafood teams also give their products star ratings, indicating what’s best that day.) A feature called Popcart lets users import all the ingredients from any online recipe, and virtual endcaps—like the impulse-buy magnets you see in physical stores—promote new products, deals, and coupons, of which there are more than 500 per week. Once an order is complete, the customer selects a two-hour delivery window.

2. Fill the Order

FreshDirect receives daily and hourly deliveries. Since everything happens in one location, FreshDirect says, it loses less food to damage, shrinkage, and the like, so it needs about 50 percent less inventory than a traditional store would to fulfill the same sales. Goods are stored in rooms set to optimal temperatures—the deli room at 34 degrees Fahrenheit, the tomato room, 55—and in-house production follows the just-in-time model, baking and making to order. (On average, it’s 11 hours from order to delivery.) The warehouse operates 24 hours a day; peak bakery time is 3 am—time to make the doughnuts. Orders are packed using an algorithm that prioritizes speed.

3. Deliver the Goods

Orders are delivered according to the customer’s account profile (including instructions like “Leave it with Carlton, my doorman”), and software manages it all: planning tens of thousands of deliveries, optimizing schedules, and adjusting to traffic on the fly. Due to the way the system operates, drivers tend to frequent the same neighborhoods and customers. “It’s technology serving the face-to-face business,” says chief consumer officer Jodi Kahn.

Quinciple: The Subscription Service

This fledgling company brings farm freshness to consumers’ doors, offering a set lineup of goods (and supporting local growers and producers in the process). Founded in 2013, Quinciple delivers 450 weekly boxes that emphasize not just local but responsible farmers and producers around the Northeast (plus a few on the West Coast and in the South). The brand strives for 100 percent supply chain transparency and sets standards around responsible animal husbandry and organic, biodynamic, and non-GMO practices. “We have smaller distributors, so we make sure that whoever is eating our food can follow it back to whoever is producing it,” says Tori De Leone, a Quinciple community manager. Since all customers get the same weekly box, the company effectively buys in bulk directly from farmers.

1. Sign Up

Customers sign up for Quinciple and set their preferences: home-delivered boxes or pickup boxes left at designated neighborhood shops. They can choose to add a few specialty items at additional cost, but otherwise everyone gets the same box. Subscriptions automatically renew and can be paused for vacations.

2. Curate the Box

About three weeks out, employees plan loose menus, usually starting with a protein, which is easier to predict (say, lamb for a fall week). Then they develop recipes around the protein, adding vegetables and grains (so that lamb might inspire a Moroccan menu that also calls for cucumbers and yogurt) and leaving room for last-minute produce.

Quinciple starts talking to farmers two to four weeks out, checking back for quantity estimates as the order nears. Pro­ducers can usually see a week out whether they’ll have the quantities needed, reducing surprises.

3. Assemble the Box

Items arrive at Quinciple’s Brooklyn warehouse one to three days before delivery. The staff gets to work packaging items, portioning bulk beans and blocks of cheese, and weighing out allotments of carrots. Frozen or refrigerated items go into insulated pouches with ice packs. Three to four days a week are spent building orders, the rest preparing them for shipment. Boxes are packed individually, labeled, and sent out for delivery.

4. Deliver the Goods

Home-delivery boxes are dispatched by a small truck service; customers get an alert when their goods arrive. An in-house worker uses a company van to distribute the pickup boxes, 75 per trip, which are then available in three- to four-hour windows. Unclaimed food may be donated to the staff or, if space allows, refrigerated for pickup the next morning.